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Buy-to-let landlords owe equivalent of Hong Kong economy in mortgage repayments
Buy-to-let landlords in Britain owe more than £200bn in mortgage repayments – equivalent to the size of the Hong Kong economy.
And the Council of Mortgage Lenders (CML), which published the data, said changes such as Chancellor George Osborne’s plan to cut tax relief to landlords, and an expected interest rate rise, were currently causing ‘considerable uncertainty’ in the sector.
The CML urged ministers to consider the impact these changes could have on the wider economy, and suggested rent increases were likely as landlords would attempt to claw back lost revenue.
The report said: “The Chancellor’s announcement of tax changes affecting buy-to-let landlords – which are being introduced over a five-year implementation period – has created another source of uncertainty for landlords, tenants and lenders.
“The measures are likely to deter some landlords from expanding their portfolios, and may encourage others to reduce their property holdings. They could also lead landlords to seek to increase rents to cover some of their additional tax liabilities. Overall, the extent to which the measures may discourage future growth of buy-to-let and the private rented sector is unclear.
“Over the last 15 years or so, buy-to-let has made an important contribution to the expansion of the private rented sector, helping to reverse many decades of decline.
“Currently, however, there is considerable uncertainty over the impact of a series of regulatory and fiscal proposals on both buy-to-let and the private rented sector.
“We have, however, already urged the Treasury to take into account the effect of tax changes in finalising its proposals to reform macro-prudential powers.”
The CML report also said the private rented sector had doubled in size over the past 12 years, following decades of decline.
A total of 24% of all buy-to-let mortgages are now issued for properties in London, compared to just 13% of all owner occupied mortgages being issued in London.
The data also showed that buy-to-let investors favoured certain types of property – 36% of loans have been for flats and 34% for terrace properties. In London, the trend is even more pronounced, with flats accounting for nearly two thirds of buy-to-let purchases.
The CML added that the sector experienced a sharp contraction in the aftermath of the financial crisis, but since then buy-to-let has seen an even stronger recovery than the wider market, with buy-to-let lending hitting £27bn last year, from a low of £9bn in 2009.
There are also currently around 1,100 buy-to-let mortgage products on the market, the highest number since April 2008.
